Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 ?;; ELF Directorate of Secret 1T Intelligence 25X1 International Economic & Energy Weekly Secret DI IEEW 85-013 29 March 1985 Copy 8 3 0 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret International Economic & Energy Weekly iii Synopsis 1 Perspective-Foreign Effects of US Economic Trends Prepared by analysts in the DI. 3 Summit Issues: Impact of the US Recovery on the OECD 7 Summit Issues: Big Six Attitudes on Mixed Credits 11 Caribbean Oil Boom Goes Bust 15 Colombia: Oil Export Prospects 25X1 25X1 25X1 25X1 25X1 25X1 25X1 25X1 21 Rice Production: The Asian Success Story 25 Briefs Energy International Finance Global and Regional Developments National Developments Comments and queries regarding this publication are welcome. They may be directed to Directorate of Intelligence Secret 29 March 1985 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret International Economic & Energy Weekly Synopsis Perspective-Foreign Effects of US Economic Trends The international economic position of the United States has shifted dramati- cally. These shifts have created both pluses and minuses in the rest of the world, but, on balance, we believe the impact has been positive. 3 Summit Issues: Impact of the US Recovery on the OECD Strong US import demand accounted for almost one-half of the 3.4-percent GNP growth in the other OECD countries last year. 7 Summit Issues: Big Six Attitudes on Mixed Credits Some Big Six governments are sympathetic to US initiatives to curb mixed credits, but the French are likely to block progress on this issue if it is raised at The Caribbean oil-based economies-Trinidad and Tobago, the Netherlands Antilles, and The Bahamas-have been hit by the slack world oil market. The result almost certainly will be more urgent calls for increased US aid to the re- gion and even larger flows of illegal entrants into the United States. 15 Colombia: Oil Export Prospects Despite recent oil finds, Colombia's goal of becoming a significant net oil exporter remains elusive 21 Rice Production: The Asian Success Story Asian rice production has increased by 75 percent over the past 20 years as a result of government policies designed to encourage production, and burgeon- ing export surpluses have had a significant impact on foreign exchange earnings across the region. iii Secret DI IEEW 85-013 29 March 1985 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Perspective Weekly International Economic & Energy Foreign Effects of US Economic Trends fect has been positive. The international economic position of the United States has shifted dramati- cally. The current account deficit has topped $100 billion; the capital account surplus has approached $100 billion; even with the recent decline, the dollar is at heights unmatched since the 1960s; and the United States will this year be- come a net debtor for the first time since 1914. These shifts have created both pluses and minuses in the rest of the world, but, on balance, we believe the ef- telecommunications equipment The chief favorable impact has been through trade flows. Using IMF data, we estimate the $90 billion jump in US imports between 1982 and 1984 equaled the entire rise in the rest of the world's export sales over the same period. This surge of sales to the United States was a major factor in what little growth has occurred in Western Europe and in the dramatic improvements in several Latin debtors' external positions. The high dollar also allowed foreign competitors to make inroads, even in markets where the United States presumably has a competitive edge, such as computers, semiconductors, and countries. On the other hand, we believe the huge shift toward net US capital inflows probably has had some detrimental impact on the rest of the world. The increased desirability of the United States for investment-most notably of US funds that formerly went abroad-has reduced the availability of invest- able funds abroad and helped to raise domestic interest rates in other structural problems may have retarded investment in any case. The positive effects abroad on jobs, profits, and external balances of the surge in US imports of goods and services has far offset the negative impact on in- vestment. Moreover, some of the negative impact of US capital inflows should perhaps be discounted, given the probability that foreign financial and achieve further competitive inroads. How long these trends will continue is problematical, but we believe the determining factor will be perceptions of the investment climate in the United States compared with that elsewhere. So long as US demand for credit remain strong and global investors continue to view the United States as the place to invest, the current situation will continue: foreign investors will acquire additional net claims on the US economy; the dollar's value will not change markedly; the US current account deficit will persist; and foreign firms will Secret DI IEEW 85-013 29 March 1985 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Expected changes in underlying relative investment returns or expectations of a dollar decline could alter investor perceptions. Because most shifts in US capital flows have been in short-term funds, we believe that a reversal in investor perceptions could be quickly felt in financial markets. Indeed, in the last week, the foreign exchange markets reacted sharply to reports of slower US growth and the Ohio savings and loans closures. Given the large US current account deficits and the growing US net foreign debt position, a reversal in investor perceptions could set off rather large adjustments, including a sharp decline in the dollar and the trade deficit. The reversal in US trade trends, however, would remove one of the main impetuses to foreign growth. Although the greater availability of investment capital abroad would help somewhat, we do not believe it would be enough to offset the lesser trade stimulus. In such a circumstance, we would expect West European expressions of concern about the depreciating dollar, and possibly more strident stances by Latin debtors. Debtors would be more vocal if US interest rates also rose, as would be likely if the reversal stemmed from a loss in confidence in the dollar, as opposed to lower US credit demand. Although these reactions themselves would not pose major difficulties, they could complicate a number of areas, in- cluding continuing debt negotiations and the beginning of a new GATT trade round. Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Summit Issues: Impact of the US Recovery on the OECD Strong US import demand accounted for almost one-half of the 3.4-percent GNP growth in the other OECD countries last year. The increase in US imports came primarily in manufactures, a trend that especially favored the Big Six economies, the major suppliers of these goods. Canada and Japan gained the most from US trade; the United Kingdom and France benefited the least. Impact of the US Recovery The United States last year was the fastest growing major export market for the other OECD coun- tries, accounting for about two-thirds of their ex- port growth. The robust US economic expansion United States: Imports From the OECD, Seasonally Adjusted, 1983-84 Billion US 18 and the rising dollar helped boost OECD exports in 1984 to the United States by 29 percent over the previous year-a sharp rebound from 1982 when these exports fell by almost 2 percent. In contrast, most other markets for OECD goods posted only moderate gains over 1983. i 0 J J l) 1983 1984 According to simulations of our Linked Policy Impact Model (LPIM), the full impact of export 305194 385 sales to the US market alone boosted OECD GNP growth by 1.6 percentage points in 1984. As a United States accounts for 7 to 14 percent of their result, we estimate that employment remained 1.5 total exports. million higher than otherwise would have been the case) The impact of the expansion in US import demand on the individual OECD countries varied primarily according to the relative importance of the US export market for each economy. The Canadian and Japanese economies received the largest stimu- lus because the United States accounts for 70 percent and 35 percent, respectively, of each coun- try's sales abroad. The four major West European countries received a smaller boost because the Manufactures accounted for almost 90 percent of the increase in OECD exports to the United States. The biggest increases came in machinery and transport equipment where motor vehicles and elec- trical machinery accounted for almost 60 percent of the total increase for the two categories. Semi- finished goods, the third-largest category under Secret DI IEEW 85-013 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 United States: Imports From the OECD Billion us $ Estimating the Impact of US Import Demand Total 139.2 149.7 193.0 Big Six 120.1 129.9 167.2 Japan 37.7 41.2 55.9 West Germany 12.0 12.7 16.5 France 5.5 6.0 7.9 United Kingdom 13.1 12.5 14.1 Italy 5.3 5.5 7.5 Canada 46.5 52.1 65.3 Small Seventeen 19.1 19.8 25.8 manufactures, got its major boost from a $3.6 billion gain in metal sales. Consumer electronics, chemicals, and fuel were other areas where US import growth was strong. Canada, which supplies one-third of US imports from the OECD, would have suffered a decline in GNP (according to the LPIM) without the $13 billion rise in its sales to the United States. In particular, the Canadians boosted vehicle exports by $5 billion last year, one-half the OECD total. Japan, the second-largest exporter to the United States, posted $56 billion in sales in 1984 for a 36- percent gain. Japanese producers accounted for most of the OECD increase in sales of electrical machinery, business machines, and consumer elec- tronics. Although the four major West European countries averaged a 25-percent increase in exports to a total of $46 billion last year, total British sales rose by only 13 percent because of a $728 million plunge in raw material exports, mostly unwrought silver. British manufacturers, however, matched the performance of the other West European econ- omies, boosting exports by almost one-third. The West Germans made their gains in such traditional Secret 29 March 1985 We used our Linked Policy Impact Model to estimate the impact of the expansion in US import demand on OECD exports and economic growth. To estimate this impact, we determined the differ- ence between actual trade, employment, and GNP growthfor 1983 and 1984 and the simulated results for the same variables assuming no growth in US imports. Because the model links all OECD economies, the results capture not only the direct impact of increased exports to the United States, but also the indirect effects on domestic consump- tion and investment as well as increased exports to each other and the rest of the world. products as vehicles, heavy industrial machinery, and metals, and the Italians did well in textiles and apparel. French increases were moderate. Although US import demand is helping all the OECD economies, it cannot solve their fundamen- tal economic problems over the medium term. The benefits flowing to these countries, nevertheless, do provide an economic cushion as they restructure their industries and grapple with increasing unem- ployment. West European leaders are aware of the beneficial impact of the US expansion, but the recent strengthening of the US dollar is rekindling criti- cism of US economic policies. Policymakers in most industrial countries are worried that the trade Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret OECD: Export Gains to the United States, 1984 OECD Big Japan West France United Italy Canada Six Germany Kingdom (percent) 11.0 13.4 19.8 17.5 15.6 0.6 12.0 15.0 Raw materials (percent) 17.8 11.5 266.7 -25.5 92.9 5.5 125.8 10.9 Manufactures (percent) 48.0 48.9 58.2 27.3 54.3 38.9 38.8 49.0 5 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 United States: Contribution to OECD Economic Growth a 1983 1984 GNP Growth US Imports GNP Growth US Imports Non-US OECD 1.8 0.5 3.4 1.6 Big Six 2.0 0.6 3.7 2.4 Japan 3.0 0.8 5.8 3.2 West Germany 1.3 0.4 2.5 1.7 France 0.7 0.3 1.8 1.1 United Kingdom 3.2 0.4 2.0 1.3 Italy -1.2 0.5 3.0 2.0 Canada 3.3 2.1 4.7 5.0 gains-which forecasters predict will continue in 1985-will provoke Washington to impose such protectionist measures as an import tariff sur- charge, which could abort their own tentative economic recoveries. On the other side of the coin, West Europeans are also concerned about the )tential disruption to trade and monetary relations he dollar were to slide rapidly. Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Summit Issues: Big Six Attitudes on Mixed Credits Some Big Six governments are sympathetic to US initiatives to curb mixed credits, but the French are likely to block progress on this issue if it is raised at the Summit. Mixed credits-concessionary, foreign aid loans, or grants blended with standard commer- cial or official export credits-typically are used for LDC development projects that include tied purchases from the donor country. The ability of US firms to compete on such projects has been limited because they lack access to similar financ- ing, and, as a result, US businessmen are becoming increasingly vocal over the role of mixed credits in distorting international trade. Although the amount of mixed credits has apparently declined in recent years, a resumption of LDC growth would also reflected cutbacks in the development pro- grams of key LDCs. The yearly commitments for mixed credits remain small in relation to annual OECD capital goods exports of $75-85 billion to the LDCs, but the total value is larger than official reporting indicates. Estimates on mixed credits depend on country submissions to the OECD, and these are subject to underreporting. Tokyo, for example, acknowledged five mixed credit transactions in 1981-83 totaling $891 million. probably revive their use. The use of mixed credits grew rapidly in 1982 when a number of OECD governments apparently began to use such credits to circumvent the strengthened 1981 OECD consensus agreement on export cred- its-an arrangement that set minimum interest rates on official export credits to limit government interest rate subsidies on such loans. According to the OECD, the value of mixed credit commitments rose from $3.5 billion in 1981 to $5.2 billion in 1982. Alarmed by this growth, OECD governments agreed to screen mixed credit proposals more tight- ly after July 1983 and to ban mixed credits con- taining a grant element below 20 percent. Mixed credit commitments fell to $2 billion in 1983 and $1.5 billion last year. OECD aid devoted to mixed credit programs dropped from 6 percent of total bilateral aid commitments in 1981-82 to 3 percent in 1983-84. Countries seem to be honoring the 20- percent aid requirement. Tighter discipline contrib- uted to the drop in mixed credits, but the decline Once LDCs adjust sufficiently to resume develop- ment plans and projects, pressures for new mixed credits may intensify. China, for example, is active- ly soliciting mixed credits to finance its develop- ment program. Some LDCs, such as India, have become adept at augmenting multilateral lending, such as World Bank loans, with mixed credits. Mixed credit competition will remain especially strong in the telecommunications sector The United States has proposed that the minimum grant element of mixed credits be raised from 20 to 50 percent. Such a requirement would increase the budgetary costs of mixed credit programs and discourage their use for commercial competition. The US proposal would apply to all foreign aid loans tied to donor nation procurement. Secret DI IEEW 85-013 29 March 1985 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 All of the Big Six governments have on occasion issued mixed credits. Some consider mixed credits an integral part of their export strategies; others employ mixed credits chiefly on an ad hoc basis to match competitors. Unlike humanitarian aid, mixed credits are directed toward relatively affluent LDCs and are concentrated in capital-intensive sectors-principally power generation, steel, telecommunications, and transport. France accounts for slightly less than one-half of all mixed credits issued by OECD governments, and Paris does not hesitate to use foreign aid as a tool to promote exports. Mixed credits are generally the only type of project aid Paris is willing to make available for LDCs outside the francophone area. French mixed credits typically have a minimal aid component, highlighting their commercial character. use mixed credits aggressively, they are con- strained by low aid resources, which prevent Ital- ian companies from participating in many such deals. Italy accounts for slightly more than 9 percent of all mixed credits. Japan is the fourth-largest issuer of mixed credits, accounting for slightly less than 9 percent of the world total. Tokyo uses mixed credits to match competitors and to augment its extensive yen-loan program. Yen loans, which are highly concession- ary, can often underwrite LDC projects without any other type offinance. Mixed credit transactions presently need approval by an inter- ministerial committee. The United Kingdom accounts for about one-fourth of all mixed credits, despite the Thatcher govern- ment's stated aim of ultimately banning such financ- ing methods. A new trade/aid facility was established in 1977 to match competitors' efforts, but the govern- ment began in 1981 to negotiate mixed credit lines directly with LDCs. Italy has patterned its program after the French: a high proportion of foreign development projects in- volve mixed credit, which, in turn, contain a relative- ly low aid component. Although the Italians try to Secret 29 March 1985 Canada has been a minor player in the mixed credit game-on average only 5 percent of bilateral aid has been allocated to such finance. The more interventionist government of former Prime Minis- ter Trudeau had proposed a new trade/aid fund that could have multiplied mixed credit usage. The Mulroney government has put this facility on hold, however, pending an overall review of Ottawa's foreign aid policies. West Germany is opposed in principle to mixed credits and is not a significant practitioner. 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Big Six reactions to the US proposal vary widely. The French reject the US proposal and are ada- mant in defense of their mixed credit program. Paris contends that mixed credits increase the overall volume of developmental aid and are there- fore beneficial to LDCs. Moreover, the French point out that mixed credit use has declined, and deny, in any case, that mixed credits distort trade. The French likely perceive the United States as the sole hardliner on this issue and, given the divisions in the United States over subsidized export financ- ing, probably consider US retaliation with its own mixed credit scheme an empty threat. Japan is pushing a compromise-raising the minimum grant element to only 25 percent. The Italians back the French in opposition to a major boost in the minimum grant element but would probably agree to the lower Japanese proposal. The West Germans, on the other hand, support the United States on the need to phase out mixed credits, but Bonn seems reluctant to push hard on this issue. The British Treasury agrees with the United States on the need for tougher rules on mixed credits, although British trade officials are more ambivalent and publicly advocate the use of foreign aid to promote exports. The new Canadian Government appears to be leaning toward a tough- er line against mixed credits and supports in princi- ple the US proposal. Some Big Six governments feel that mixed credits are not a priority issue, but almost all are willing at least to compromise on tighter rules on disclosure and on prior notification of mixed credit offers. 9 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 United States Cayman Islands (U Ki Guantanamo US S Neva; S.r r . Turks and Caicos Islands (U K.) Dominican Republic Puerto Rico lUS; Virgin Islands U S.i St Martin Saint Christopher and Nevis Honduras Secret 29 March 1985 Netherlands Antilles (Netherlands! St Lishrrrtus Antigua and Barbuda Guadeloupe (France) St. Vincent and the Grenadines Barbados Martinique (France) Trinidad and Tobago Boundary representation is not necessarily authoritative. Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Caribbean Oil Boom Goes Bust The Caribbean oil-based economies-Trinidad and Tobago, the Netherlands Antilles, and The Baha- mas-have been hard hit by the slack world oil market. Primarily geared to produce heating oil for the US market, Caribbean refineries are operating at half capacity or less because of excess refining capacity in the United States and the switch to cheaper energy sources by US consumers. More- over, the Netherlands Antilles and Trinidad have been hurt by sluggish growth in tourism-their second-largest foreign exchange earner-and de- pressed island-based shipping. The result has been an overall economic stagnation in the past four years for all three countries compared with the 5- percent average annual growth during the 1976-80 period. In addition, the economic decline of these wealthier islands is already having a negative im- pact on the other Caribbean nations. The result almost certainly will be more urgent calls for increased US aid to the region and even larger flows of illegal entrants into the United States. Despite the economic doldrums that afflicted much of the Caribbean region during the past decade, the oil windfall in Trinidad, the Netherlands Antilles, and The Bahamas until recently helped to cushion the region's problems. As a result, these islands became havens for migrants from other Caribbean countries seeking job opportunities. Moreover, Trinidad became both the largest regional aid donor and market for Caribbean-made goods. These countries also used their rapidly rising oil earnings to begin diversifying their economies. Trinidad ventured into costly, energy-intensive in- dustries such as steel and petrochemicals. Petro- leum receipts allowed the Netherlands Antilles and The Bahamas to bolster tourism and offshore bank- ing by providing the extra revenue necessary to offer generous investment and tax breaks. With the worldwide recession of the early 1980s, however, virtually all of these islands' foreign exchange earners-including oil-began to flag. Economic activity in Trinidad fell about 3 percent in 1984, following a 2.6-percent decline in 1983. Lagging crude and refined product output, which contributes nearly 50 percent of GDP and 75 percent of export earnings, was largely responsible. Other important sectors also performed poorly- agriculture continued to suffer from prolonged neglect, construction sagged, steel sales fell because of quality and marketing problems, and petrochem- ical exports declined. As a result of two consecutive $1 billion balance-of-payments deficits, foreign re- serves at yearend 1984 stood at less than $1 billion. The government belatedly tightened controls on imnnrtc sand withdrew some consumer subsidie~ Most workers, including the salaried middle class, have been hurt badly by even limited belt-tighten- 25X1 25X1 ing and have shown signs of restiveness. The unem- ployment rate tops 20 percent. Formerly generous wage increases now are held well below the 20- percent rate of inflation. As a result, labor unrest increased in the past year, with strike actions hitting most major industrial installations. In addi- tion, a work slowdown by most of the country's 65,000 public-sector workers-demonstrating re- jection of the government's wage contract propos- als-temporarily brought the country to a near standstill last fall. Only generous Dutch aid allowed economic activity in the Netherlands Antilles' six-island federation to grow at even a snail's pace during 1983 and 1984. Secret DI IEEW 85-013 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Caribbean Petroleum Exporters: Economic Growth and Inflation, 1974-84 let Lent aribhean I'elrolcunt I.y i rlcr~ a Inllalion GNP .10 I 1 t i 10 1Q_4 80 8-1 10 194 80 84 lire leiherlanth Trinidad and Anlille. Tobago 20 Iu - - io I I 11 1 I I t I _ _1 I ; I i -L-1-i_LJ 10 11),4 80 84 10 1974 80 84 The oil sector's poor performance-output of petro- leum products contributes about 30 percent of the country's GDP and 97 percent of export earnings- was to blame. Other important sectors also lan- guished. New US legislation removed the withhold- ing tax exemption for US investment in that coun- try's financial sector, hurting Antillean offshore Secret 29 March 1985 banking activities. The strong US dollar has in- creased the attractiveness of Western Europe and other vacation spots contributing to the steep drop in tourist receipts. Unemployment continued to rise, topping 25 percent. Meanwhile, the govern- ment-hoping to ride out the world oil slump- avoided belt-tightening. As a result, foreign re- serves fell to $100 million by yearend 1984, half of the peak 1982 level. During 1983-84 real economic growth in The Bahamas averaged only 2 percent because the performance of nonoil sectors was not strong enough to fully offset growing problems in that country's petroleum industry. Only tourism- buoyed by the US economic recovery, an aggressive advertising campaign, and close proximity to the United States-and banking-probably helped by drug-related money laundering-showed any real improvement. In these circumstances, the jobless rate rose to about 25 percent by yearend 1984. The crime rate-partly drug related, according to press reports-jumped alarmingly as well, especially among unemployed youths. As a result, the govern- ment initiated negotiations in early 1985 with Haiti to return illegal immigrants-who, according to the US Embassy, may number over 50,000. Looking Ahead The principal concern in Trinidad is the expected shutdown of Texaco's unprofitable refinery at Point a Pierre and of on-island producing fields. Texaco, according to press reports, will close the refinery if a buyer is not found, idling 3,400 workers and eliminating 40 percent of Trinidad's export earn- ings. Although the government recently held preliminary talks with the IMF on financial assistance, national Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Caribbean Area: Petroleum Exports and US Share, 1974-84 tear gas this month to disperse 200 to 500 demon- strators protesting a 10-percent cut in public-sector elections, scheduled for late 1985, will make it especially hard to come to terms with the Fund any time soon. Exxon's closure this month of its refinery in the Netherlands Antilles will severely compound that country's economic troubles. Royal Dutch Shell also has announced plans to pull out unless costs can be cut. A shutdown of both refineries virtually would bankrupt the economy and directly add about 2,000 workers to the jobless ranks, pushing the country's unemployment rate to nearly 30 percent. According to the US Embassy, the govern- ment expects other traditional foreign exchange earners to decline further-government revenues from offshore banking alone are forecast to drop 30 percent over the next few years as effects of new US legislation take hold. Moreover, growing eco- nomic troubles are likely to generate sporadic unrest, particularly as Aruba prepares to leave the Federation in early 1986. Police on that island used wages, a result of the Exxon closure. In The Bahamas, should the BORCO refinery close-one of its owners, Charter Oil Company, reportedly has filed for bankruptcy-or related petroleum transshipment activities be curtailed, the impact would be much less severe than in the other countries but still could cost several hundred jobs and a sizable loss in export earnings. Overall performance in other key sectors is unlikely to improve much over the near term. Tourism proba- bly will not grow much until the value of the US dollar moderates against other currencies. Al- though the country could initially attract some business from the Antillean banking industry, any financial gains would be short lived; Washington and Nassau are finalizing negotiations on a 15- month agreement to allow limited US access to Bahamian banking records. Worsening difficulties in three of the Caribbean area's larger economies can be expected to contrib- ute to more urgent pleas for stepped-up US aid to the region. We believe these islands also will exert stronger pressure on Washington to provide prefer- ential treatment under the Caribbean Basin Initia- tive (CBI) and to try to deter or compensate for any substantial US private disinvestment. For its part, the Netherlands Antilles lobbied the US Govern- ment to stop the Exxon closure. Moreover, worsen- ing economic conditions and the efforts to expel illegal immigrants from other Caribbean islands will increase illegal immigration to the United States from the region. Growing economic hardship also is likely to open the door to further Communist penetration efforts. Cuba already may be attempting to exploit eco- nomic difficulties in the Netherlands Antilles and Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Colombia: Oil Export Prospects Despite recent oil finds, Colombia's goal of becom- ing a significant net oil exporter remains elusive. Potential oil exports could provide Bogota $1-2 billion in foreign exchange annually. The Betancur administration needs to raise $700-800 million in investment capital to fund infrastructure and field development costs, but international lenders are reluctant to provide credit. In addition to improving Colombia's financial outlook, these oil earnings may aid Bogota's efforts to bring the drug industry under control and combat a persistent terrorist and insurgent threat. Barrels Per Percent Day of Total Magdalena basins 122,499 73 Llanos basin 17,873 11 Oil production, which peaked in 1970 at 220,000 b/d, began a steady downward course shortly thereafter prompting the government to initiate policies aimed at rejuvenating domestic oil supplies. Prices paid to producers were raised to world levels, investments in oil recovery projects were increased, and contract terms were adjusted to attract foreign investors. Since 1979, according to the Ministry of Mines, production began to increase gradually-at an average annual rate of about 6 percent-from a low of 125,000 b/d. According to Embassy report- ing, production last year averaged 168,000 b/d and-for the first time since 1975-surpassed do- mestic oil consumption. We believe oil consumption will rise slightly through 1990, perhaps to as much as 200,000 b/d. Slow economic growth and the completion of nonoil energy projects will help keep oil demand in check. Bogota will also continue to promote oil conserva- tion-through its policy of maintaining prices at near world market levels-with the goal of mini- mizing imports and increasing oil revenues. The In the mid-1970s, Colombia began offering oil companies "association contracts," which-accord- ing to industry analysts-includes contract terms among the most attractive in the international oil market.' Colombian officials state that foreign investment under association contracts increased steadily from $127 million in 1979 to $267 million in 1982. Investment dropped last year to $186 million in the wake of worldwide recession and weak oil demand. Despite the continued oil market softness, investment is expected to rise again as new finds and favorable contract terms encourage addi- tional exploration efforts. ' Under association contracts, foreign oil companies are responsible for all exploration costs, but once a discovery is declared commer- cial, Ecopetrol-the national oil company-will pay 50 percent of development costs. The operator is required to pay a royalty equal to 20 percent of the volume of oil and gas produced, and the rest is shared equally with the government. Companies are paid the world price for their oil and allowed to export after domestic requirements success of this approach may be tempered by declining international oil prices. Secret DI IEEW 85-013 29 March 1985 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Colombia: Oil Production and Consumption Thousand b/d 450 - Possible production range could contain 760 million barrels and produce as much as 220,000 b/d. Other industry personnel in Colombia, however, believe these figures to be overly optimistic. Construction of a 300-kilometer pipeline is required to link the finds with an existing pipeline at Rio Zulia. Crude will be transported from Rio Zulia to either the Tibu refinery or to Colombia's main pipeline network at Ayacucho. Initial capacity of the new line will be 90,000 b/d that can be expanded to 250,000 b/d with construction of additional pumping stations. Last August a $171 million contract was awarded to a West German and British consortium with a scheduled comple- tion date of January 1986. A second pipeline system is planned to connect the fields of Apiay and Casanare in the southern part of the Llanos to an existing pipeline that traverses the center of the country. A contract award is expected shortly. These fields are estimated to have sufficient re- serves to provide an additional 20,000 b/d through We believe Colombia has the potential to surpass its 1970 production record of 220,000 b/d and once again become a sizable net oil exporter. Upon completion of the Rio Zulia pipeline, total domestic output should increase to about 280,000 b/d and exports could rise to about 100,000 b/d. If more optimistic production levels are achieved, Colombia could be producing more than 400,000 b/d by the end of the decade and exporting close to 200,000 b/d. Exploration has been concentrated in the Llanos basin where production has increased from 3,500 b/d in 1982 to the current 18,000 b/d. The most significant discovery of late has been the joint Occidental/Ecopetrol finds in the Cravo Norte concession. According to Embassy reporting, pre- liminary evaluations indicate proved reserves of at least 400 million barrels that will allow an initial production rate of 90,000 to 100,000 b/d. Compa- ny officials estimate the Cravo Norte concession Secret 29 March 1985 In addition to new finds, secondary recovery proj- ects are scheduled to stem the decline in output from fields in the major oil-producing region, the Magdalena Valley. A major water injection project is planned for the Casabe and Cocorna fields. Industry experts expect production from these two fields to more than double to about 40,000 b/d by The southwest Marcaibo and Putumayo basins supply the remaining oil-approximately 27,400 b/d. A majority of the fields within these basins started producing in the early 1960s and are now nearing their full potential. Recent successful drill- ing tests and enhanced oil recovery techniques, however, are expected to boost production slightly. 25X1 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Petroleum Development, Insurgent Operating Areas, and Narcotics Growing Areas Peninsula de la Guajira .Panama *PANAMA Aidimieldgo Netherlands Antilles Aruba (Netherlands) Ccracao *.; i6onare WILLEMSTAD CARACAS Venezuela J Ar uCa Departaarmento / ap~roxini ale 1,9- 1-1 ,BOGOTA ~j v Villavicencio ,QUITO Ecuador Oil basin limit Area of oil concentration Oilfield Crude oil pipelines existing - - under construction Refinery 200 Kilometers 200 Miles Colombia Panama Peru -1 Traditional coca cultivation area Neth. Antilles , (Neth.) Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Constraints on Development Although Colombia has the potential geologically to become a significant net oil exporter, it is likely that it will suffer setbacks in its production timeta- ble because of financial and security concerns. We estimate Colombia's share of the roughly $1 billion in development costs of the Llanos basin and the Casabe and Cocorna fields to be $700-800 million. Although Bogota, through Ecopetrol, will generate a portion of the needed capital, most will have to be raised on the international market. Bogota received a financial boost in November 1984, when the World Bank approved a loan of $130 million for field development. Colombian officials are hoping that the World Bank loan will encourage additional credit from private as well as international lending sources. International lenders, however, remain re- luctant to lend to Colombia in light of its worsening economic conditions, balance-of-payments difficul- ties, a $12 billion foreign debt, and the absence of a formal debt repayment plan. We believe capital inflows would be more forthcoming, however, if Bogota undertakes austerity measures under an IMF program. The Rio Zulia pipeline is the linchpin to Colom- bia's quest for continued oil development. In recent months, however, there have been sporadic inci- dents of sabotage to pipeline facilities and kidnap- ings by the National Liberation Army (ELN). Construction ceased with the abduction of a high- level West German official; his release was granted in exchange for a substantial ransom. After Bogota agreed to provide additional security measures, construction resumed in early January. The first 130 to 160 kilometers of the pipeline must be laid before the rainy season begins to avoid further delay. the scheduled completion date of January 1986 remains attain- able. If terrorist attacks continue, however, despite improved security measures, we believe completion could be pushed back by up to a year. In addition to problems with terrorists, the pipeline will extend into regions where cocaine smuggling is common. Drug traffickers, however, do not pose as Secret 29 March 1985 Columbia: Petroleum Sector Investment Program, 1984-88 Million US $ Total 2,124 952 3,076 Exploration 203 450 653 Development 990 379 1,369 Pipelines 323 123 446 Refineries 358 0 358 a Includes export credits and international loans. Includes $700 million earmarked for development of the Llanos basin and comple- tion of enhanced oil recovery projects. serious an impediment to pipeline construction and personnel security as do guerrilla groups-only 5 to 10 percent of all cocaine trafficking in Colombia takes place along the pipeline route. Moreover, narcotics traders, may use the pipeline support infrastructure and personnel to facilitate smuggling activities. Although the construction phase will increase government and corporate presence in the vicinity and may temporarily interrupt trafficking activities, we believe traffickers will adjust by relocating operations. If government activities and military personnel begin to affect profits of these organizations, however, violence may occur and possibly disrupt oil production Implications Since 1980 Colombia has progressively improved its oil trade balance. A lower volume of imports coupled with low world oil prices reduced Colom- bia's oil import bill from $700 million in 1980 to about $445 million in 1984. At the same time, steadily rising production has generated additional export earnings. Last year, according to Ecopetrol, Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Colombia generated a small oil trade surplus, and we believe this surplus will grow. Upon completion of the pipeline, net oil export earnings could aver- age about $1 billion annually and double that amount if more optimistic production levels are achieved. This additional foreign exchange would ease debt service pressures, enable Bogota to focus on economic recovery, and possibly permit greater drug enforcement efforts. 19 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Rice Production: The Asian Success Story Asian rice production has increased by 75 percent over the last 20 years as a result of government policies designed to encourage production, and burgeoning export surpluses have had a significant impact on foreign exchange earnings across the region. The growing political leverage of Asian farm lobbies will work in most countries to ensure continued production gains, import cuts, and export growth. As a result of these trends, the United States, a major rice exporter, will face continued Asian competition in African, Middle Eastern, and European markets, as well as the permanent loss of such lucrative Asian customers as South Korea and Indonesia. Responsive Government Rice Policies Asian governments have long recognized the politi- cal importance of ensuring sufficient rice supplies, particularly in the cities, while at the same time providing for the welfare of rice farmers, who account for about half of the region's population. To reach these goals, these governments have fol- lowed widely different policies. Although most set quotas on amounts that must be sold to the govern- ment, a wide range of free market entrepreneurship on the part of farmers and traders is permitted. For example, the Government of North Korea has a monopoly on trade, and all production above subsis- tence levels goes to the state. At the other end of the spectrum, less than 13 percent of Thai rice is procured by the government. India's successful Green Revolution has spread across Asia. Success has been facilitated by large amounts of private and public investment in irriga- tion, subsidized farm inputs, and hybrid seeds adapted to local conditions. In turn, better yields in combination with effective price stabilization and government procurement policies have stimulated Asian rice farmers to expand production. Powerful farm lobbies intent on protecting farm interests against the demands of competing sectors have evolved in most Asian rice-producing coun- tries. Across the political spectrum Asian govern- ments have had to accede to the demands of rice farmers for price increases, increased input subsi- dies, and liberalized credit terms, as well as greater tolerance of free market forces. The Payoff-Sufficient Food and Current Account Dividends Careful orchestration of rice policy over the past 20 years has spurred a 75-percent increase in Asian rice production from an already large base; the region now produces 92 percent of total global supplies. With 45 percent of the crop still depen- dent on monsoon-driven rains, production gains have not been even, however. Some countries- Vietnam and the Philippines-for example, tempo- rarily emerged as net exporters, only to fall behind again as a result of combinations of bad weather, misguided farm policy, or political disruption. Most countries, however, have been able to sustain pro- duction gains over the longer term. The rapid gains in total production have contribut- ed to a significant improvement in the trade bal- ances in the region. Despite population growth rates of about 2 percent, the Asian share of world rice imports dropped from nearly 65 percent in 1965 to 30 percent this year, and the Asian share of exports held steady at about 66 percent: ? Pakistani exports increased by 850 percent, al- though consumption doubled. Secret DI IEEW 85-013 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 ? Indonesia and South Korea, which each imported 2 million metric tons of rice annually during the 1970s, are expected to import little or no rice in 1985. World production 180.9 226.4 313.8 Asia 165.0 206.0 288.1 China 85.1 86.7 123.2 India 39.3 39.6 58.5 Indonesia 9.6 15.3 25.0 Bangladesh 10.5 11.3 14.3 Thailand 7.5 8.8 12.2 .Japan 1 1.5 11.2 10.8 Burma 5.3 5.4 9.0 Vietnam 6.3 7.2 9.0 South Korea 4.0 4.4 5.7 Philippines 2.6 3.7 5.1 Pakistan 1.4 2.3 3.5 North Korea 1.4 2.4 3.5 Taiwan 2.1 2.3 2.0 Nepal 1.5 1.6 1.8 Sri Lanka 0.7 1.1 1.5 Cambodia 1.8 0.4 0.9 Malaysia 0.7 1.4 1.1 Laos 0.5 0.6 0.7 Afghanistan 0.2 0.3 0.3 Brunei NEGL NEGL NEGL Other 15.9 20.4 25.7 United States 2.4 3.7 4.4 Brazil 5.2 4.8 6.1 EC Ten 0.6 0.8 0.8 ? India, self-sufficient in most years, was a substan- tial net exporter from 1978 to 1982, and now imports only to replenish stocks during periods of low world prices. ? Both Burma, where rice exports account for 40 percent of export earnings, and Thailand, where rice earns 15 percent of the total, have tripled exports in the last decade. Secret 29 March 1985 Effective management of rice policy in the face of the growing political influence of farm lobbies will challenge Asian planners for the remainder of the decade. Embassy reports indicate that the need to reduce burdensome farm subsidies poses a dilemma for countries such as South Korea, where consump- tion is declining, as well as for those for which continued increases in production are essential India and the Philippines, for example. Steps are under way in South Korea to reduce the govern- ment deficit by cutting rice and fertilizer subsidies, but Seoul may face strident opposition from farm- ers. In India, both the federal and state govern- ments are being squeezed by rising farm subsidies and growing political influence of farm lobbies. Filipino farmers predict a shortfall of 300,000 tons in the fall harvest unless demands for a rollback in production costs are met. Complicating the task of government rice planners is the instability of the world rice market, both as to availability and price. Only about 5 percent of the world rice crop enters international trade, and about half of total production is dependent on the vagaries of the Asian monsoonal rains. World prices are currently at a 10-year low and demand is weak, causing problems for major exporters such as Thailand and Burma. The market could shift rap- idly this year, however, because global stocks- currently at a 10-year low-are inadequate to compensate for crop losses if the weather turns bad. Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret World Rice Trade, 1965 and 1985 23 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 World Rice Prices, 1970-85 I. IS S per metric ton 700 uti ::ult:LLLUiliiwlltiitui_ uLL Iit1u.'iIu [[t1 0 19711 75 80 8S \lilled, Zenith No 2. medium grain miller toodisiributor, I.~~. I, Ncn of eins. H VVhi~c milled , 'CI Celli hrrkcn, to b Raneknti united Suites as of February 19851 Thailand as of February 1985 n A growing ability to supply the high-quality rice preferred by consumers in the Middle East and Western Europe is enabling some Asian exporters to capture shares of these traditional US markets. Thai producers have developed varieties of rice designed to appeal to these stable markets and have installed improved milling and sorting machines. As a result, in combination with low Thai prices, Thai rice exports to the EC doubled in 1984. In addition, eco- nomic reforms providing incentives to export rice have resulted in a larger availability of good quality Chinese rice on the international market. Secret 29 March 1985 The Asian competitive advantages in climate, cheap labor, low energy usage, and strong govern- ment support suggest continued formidable compe- Large Asian purchases from the United States in deficit years-such as the I- million-ton Korean purchase in 1981-are becom- ing rarer. At the same time, US prices-currently about 50 percent higher than Asian prices for comparable quality-are particularly unattractive to the poorer African countries and have led to growing US rice stocks. Pressure likely will build for concessional US sales and credits from these African countries and probably the Philip ines. Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Energy Nigeria Expanding Nigeria has reversed policy and is negotiating countertrade deals in an effort Countertrade in Oil to raise import levels in the face of high debt service and falling foreign exchange earnings. Brazil is discussing a second barter deal worth about $1 billion over the next year, and Canada, Yugoslavia, France, Italy, Austria, and West Germany have indicated interest. Although conserving on hard currency import costs, such deals do not add to foreign exchange available for debt repayment and diminish the government's ability to respond to changes in world oil prices. Furthermore, cuts in oil revenues that are shared with Nigeria's 19 states risk heightened regional discontent, particularly in the south where opposition to the northern-dominated government is already festering. Brunei Slashes Brunei's only oil-producing company, Brunei Shell Petroleum (BSP) Oil Production to reduce production to 50,000 b/d-a 70- percent drop from the 1984 production level By late last month, BSP-which is 50 percent owned by the govern- ment-had lowered production to 88,000 b/d. This production cut is probably in response to the current world oil glut and may also signal the emerging ef- fectiveness of the Petroleum Unit-the government office responsible for implementing petroleum polic New Libyan Production at Libya's new Ra's al Unuf refinery continues to average about Refinery Online 20,000 b/d since testing began earlier this year. Output is being sold on the spot market with negotiations under way for term contracts with several West European countries. Plans call for 120,000-b/d production by midyear-half of designed capacity. A substantial portion will go to the domestic market because existing refinery capacity of about 130,000 b/d barely meets domestic demand. Construction of phase two of Ra's al Unuf-including petrochemical units-is moving ahead. Weak world demand for petroleum products and petrochemicals, however, probably will keep production and revenues well below planned levels. Secret 29 March 1985 25X1 25X1 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Shortfalls in Harsh winter weather has contributed to a 15-percent drop in hard currency Polish Coal Exports exports-mainly coal-in the first two months of this year, as compared with the same period of 1984. The decline in coal exports may reflect in part a deci- sion to give priority to increased consumer demand during the cold weather. The Poles exported a record amount of coal in 1984 in hopes of a second mild winter and successful conservation. Warsaw has spent the past two years trying to regain its reputation as a reliable supplier after labor unrest reduced coal exports by more than 60 percent in 1981. The recent shortfalls are likely to cause an overall decline this year in coal sales-which earned about 20 percent of hard currency revenues in 1984-and thus add to Warsaw's difficulties in meeting its financial commitments 25X1 Sudan's IMF The IMF's qualified endorsement of Khartoum's recent economic package Agreement improved Sudan's near-term financial outlook, but entails several politically explosive reforms. The memorandum of understanding is not a formal agreement but should permit disbursement of foreign bilateral and multilater- al assistance largely suspended since Sudan fell into arrears on its IMF standby arrangement in mid-1984. Resumption of this funding, worth over $400 million annually, would allow at least partial repayment of IMF arrears and substantially ease the critical foreign exchange shortage. Khartoum's reform program includes a 48-percent official devaluation, a 66-percent increase in gasoline prices, and a 30-percent increase in the price of bread. The bread price increase has sparked violent rioting throughout the Khartoum area that could lead the Nimeiri regime to backpedal on some price increases, thereby jeopardizing the IMF accord. Mauritanian Debt Mauritania has signed a letter of intent with the IMF for a standby loan for Negotiations 1985. Conclusion of the agreement, however, requires that Nouakchott close the $160 million foreign payments gap expected this year; the government is marshaling support from Arab and Western donors. In addition, Mauritania has requested a Paris Club rescheduling of its estimated $1.6 billion foreign debt. Over $210 million is due this year-85 percent to Arab creditors. Drought and weak markets for Mauritania's primary exports-fish and iron ore-however, sharply limit Nouakchott's ability to improve its finances. 27 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Global and Regional Developments Record South Brazil, Argentina, and Paraguay will have record-breaking 1985 soybean American harvests totaling 23-24 million tons Soybean Crops Record crops this year are the result of expanded plantings, high-yield seed, and opportune late season rains. With favorable export tax incentives and aggressive marketing, large quantities of South American soybeans will be competing with US soybeans in export markets, especially in the EC and Eastern Europe. The strong dollar will make foreign producers even more competitive. US soybean exports are down 22 percent from 1983 levels, and South American exports have jumped 60 percent. Rubber Producers' Members of the Association of Natural Rubber Producing Countries Negotiating Position (ANRPC)-Malaysia, Thailand, Indonesia, Sri Lanka, India, and Singa- pore-met last week to discuss their negotiating position on the International Natural Rubber Agreement (INRA), which expires in October. Producer- consumer meetings are scheduled to begin next week. ANRPC members also agreed to seek atwo-year renewal of the current agreement-the maximum permitted. West German-Soviet Chancellor Kohl said last week that he is "favorably disposed" toward a Rail Ferry proposal to establish a Baltic rail ferry between either Kiel or Luebeck in West Germany and Klaipeda in the Soviet Union. A decision could come as early as next week. Officials of the coastal states of Hamburg, Bremen, and Schleswig- Holstein see economic benefits from the project and are the main su orters of the idea. The Soviets have been pressing for such a link for several years, probably as an alternative to costly rail transport through Eastern Europe. Bonn expects a guarantee of at least 51-percent West German ownership. National Developments Developed Countries Belgium Continues Prime Minister Martens has proposed new spending cuts for 1985 to allow the Austerity Program government to meet its original target of reducing the budget deficit to 10.4 percent of GNP. The $420 million decrease will come mainly in social expenditures, including unemployment-related early pensions, and sick pay for public servants. The government also is hoping for a smaller increase in its contribution to the EC. Despite those deficit reduction targets, Martens Secret 28 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret announced a four-year tax cut to begin in the 1986 budget-welcome news to supporters facing election later this year. More difficult bargaining between Social Christian and Liberal coalition partners will be required on next year's budget, which will be presented in June. Greek Foreign Pay- The deterioration in Greece's foreign payments position last year increases the ments Deteriorated possibility that Athens will need to seek official assistance in 1986 if present Further in 1984 economic policies are continued. The current account deficit grew 16 percent to $2.2 billion, or 6.7 percent of GNP, up from $1.9 billion or 5.3 percent of GNP in 1983. The trade deficit declined slightly, but invisibles fell for the fourth consecutive year-mainly because of a sharp fall in shipping receipts, interest payments on a growing foreign debt, and a drop in net EC subsidies. The poor external performance necessitated official borrowing of $2.2 billion, up from $1.9 billion in 1983. Foreign debt, including military debt, now totals $14 billion and debt service likely will reach 25 percent of current account earnings this year. The Bank of Greece, however, was still able to negotiate a $450 million syndicated loan on favorable terms probably because the participating banks wanted to protect their heavy exposure in Greece. South African Budget To fight persistent double-digit inflation and restore credibility, Pretoria has announced another austere budget for the fiscal year beginning 1 April 1985. South Africa's fiscal management has suffered in recent years from serious overspending, particularly for defense, and overly optimistic revenue projec- tions. Spending is set to rise by 13.9 percent-compared with current 16- percent inflation. Revenues are projected to increase by 18.8 percent-about one-third from higher taxes, including a 2-percentage-point increase in both sales taxes and the income tax surcharge. The anticipated $1.3 billion deficit before borrowing represents 2.2 percent of GDP, well below the 3-percent IMF guideline under the standby agreement. Australian Strike Last Friday the state of Queensland passed unprecedented legislation outlaw- Laws Strengthened ing industrial disputes in the electrical industry, requiring workers to sign no- strike contracts and subjecting strikers to suspensions and heavy fines. A February strike by the Electrical Trades Union caused 15 days of statewide power outages, closed Queensland ports, and cost businesses approximately $420 million, according to the US Consulate in Brisbane. Although public opinion is solidly behind the government, union officials have threatened sporadic strikes to cut state revenues. The umbrella Australian Council of Trade Unions has given Queensland unions the go-ahead in their campaign against the state's National Party government undoubtedly because it fears the spread of strike-limiting legislation. 29 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Less Developed Countries Explosion at Iraqi An explosion heavily damaged central bank headquarters on 14 March, Bank Headquarters producing temporary confusion throughout the Iraqi banking system. The US Embassy reports foreign businessmen are having trouble obtaining foreign exchange transfers, and several embassies have encountered difficulties mak- ing deposits or withdrawals. Key records may have been destroyed, but no workers were harmed in the afterhours blast, and bank activity is slowly returning to normal. Additional restrictions on issuing letters of credit will continue for at least a short time, and foreign worker remittances will be snarled. Aluminum Smelter in According to Embassy reporting, the Aluminum Company of America is Saudi Arabia? considering building a smelter in Saudi Arabia as a joint venture with Saudi industry and government. This would continue the trend of locating aluminum smelting near low-cost energy sources; since 1980 aluminum smelting capacity in the Persian Gulf region has increased more than 40 percent. Although these countries account for a small share of total world aluminum capacity at present, low-cost energy supplies assure their growing importance, putting increased pressure on high-cost Western producers. US primary aluminum capacity has, for example, remained at the 5-million-ton level since 1980 and nearly one-fifth of this capacity is idle. Algerian Land Reform The Algerian Government has offered free state land to small farmers around Algiers probably as a trial balloon to help raise production through conversion of collective farms to private ownership. The US Embassy says that response has been mixed because the government will retain control over crop choice and marketing. The 1985-89 plan stresses development of agriculture and water resources and, especially the land reform program, is a major break with past emphasis on industry and reflects Bendjedid's growing ability to guide the economy over the opposition of remaining socialist hardliners. Algerian Price Prices for bread and other subsidized goods have been raised 12 to 17 percent Increases by Algiers-the sharpest increase in recent years and probably the beginning of a broader campaign to contain foreign borrowing needs and stimulate domestic agricultural production. The rising subsidy burden consumed almost $400 million-5 percent-of budget revenues in 1984. The new price adjust- ments will trim $50 million from the subsidy bill this year. Algeria's pervasive security forces and the limited expectations of most Algerians have helped control discontent so far, but tighter austerity increases the likelihood of unrest especially in urban areas. Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Nicaraguan Coffee Despite President Ortega's claims to the contrary, Nicaraguan coffee export Harvest Falls revenues will be $50-100 million below Managua's target according to the US Short of Goal Embassy. Private-sector growers estimate that the December-March harvest will fall about 400,000 quintals short of the 1.2-million-quintal goal. They have told US officials that, despite a bumper crop, the harvest was down because of the use of inexperienced workers, Contra activities, and the threat to pickers of military impressment. Moreover, at least 20 percent of the crop is below export quality because of the overextended harvest period. Managua will likely be forced to purchase coffee on world markets to satisfy contracts let last fall based on the government's optimistic production estimate. Uruguay's New President Sanguinetti's reliance on market-oriented officials probably signifies Economic Team pursuit of coherent stabilization policies rather than quick economic fixes. Foreign Affairs Minister Enrique Iglesias is entrusted with international economic policy and will likely play the major role in debt negotiations with the IMF and commercial banks. Although he is a vocal supporter of political dialogue with creditors, US Embassy officials indicate he opposes a debtors' cartel. Finance and Economy Minister Ricardo Zerbino, a free market economist, will probably support exchange rate adjustments to stimulate export-led growth, cuts in government spending, and improved tax collection. We judge this will allow the new Central Bank President, Ricardo Pascale, to pursue a tight monetary policy to fight inflation and maintain export competitiveness. With these policies, Uruguay will probably be able to reconcile with the IMF and reach agreement with its creditors to ease external constraints on growth. Cabinet Changes The US Embassy reports an upsurge in rumors of leadership shifts as the Rumored in Jakarta Soeharto government begins a new fiscal year next Monday. Local bankers are criticizing Finance Minister Prawiro for his weak leadership and ineptness in introducing a new value-added tax. They are also watching Prawiro's moves to clean up the notoriously corrupt Customs Service, a task not helped by his rep- utation for dishonesty. One Embassy source said that longtime Soeharto aide, Sudharmono, will head a newly created structure overseeing domestic politics. Sudharmono's son-in-law, Ginandjar Kartasasmita, who was recently named to head the Capital Investment Coordinating Board, would combine oversight of foreign and domestic investment with his other duties involving the promotion of domestic products. Such moves would continue the economic housecleaning by President Soeharto who, in the past several months, has replaced the leadership of the state oil company, the national airline, the investment coordinating board, and the Customs Service. 31 Secret 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sharp Drop in Soviet Soviet orders of Western machinery and equipment totaled only $1.1 billion in Orders for Western 1984-the lowest in more than a decade and one-half the 1983 level. Leading Machinery and the decline was a precipitous drop (from $1.6 billion in 1983 to about $295 mil- Equipment lion last year) in new orders for the oil and gas, chemical, and metallurgy in- dustries. Only partially offsetting this decline was a near doubling of orders for the transportation sector (from $213 million in 1983 to $387 million in 1984) and a slight rise in new contract commitments for the consumer goods sector. As in recent years, the lion's share went to Western Europe ($731 million) and Japan ($251 million). US firms, in contrast, took only about 6 percent ($70 mil- lion) of the total, reflecting Soviet efforts since the imposition of Western sanctions to become less dependent on US machinery and equipment. Despite last year's poor showing, we expect the pace of contracts placed in the West to pick up somewhat as the Soviets embark on their 12th Five-Year Plan. Lao Trade Through Vietnam is apparently succeeding in its attempt to divert Laos from its Thailand Drops dependence on Thailand as a conduit and market for foreign trade. According Sharply to a World Bank economist, the share of Lao import tonnage transiting Vietnam increased from one-fifth in 1982 to two-thirds in 1985, and Lao commodities are increasingly exported through Vietnam including all Lao gypsum and tin ore for smelting in the Soviet Union. Wood-Vientiane's primary export is now exported chiefly as logs to Vietnam because Lao sawmills have failed to meet standards for the Hong Kong and Japanese markets. Although unofficial border trade with Thailand will probably continue, we expect the upgrading of road links and the construction of an ad- ditional oil pipline connecting Laos and Vietnam to further reduce dependence on transshipment through Thailand. Secret 32 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Iq Next 1 Page(s) In Document Denied Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Secret Secret Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Directorate of Intelligence Economic & Energy Indicators DI EEI 85-007 29 March 1985 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 This publication is prepared for the use of US Government officials, and the format, coverage, and content are designed to meet their specific requirements. 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Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Economic & Energy Indicators Page Energy World Crude Oil Production, Excluding Natural Gas Liquids 8 Big Seven: Inland Oil Consumption Big Seven: Crude Oil Imports OPEC: Crude Oil Official Sales Price OPEC: Average Crude Oil Official Sales Price (Chart) Industrial Production Gross National Product Consumer Prices Money Supply Unemployment Rate Foreign Trade Current Account Balance Export Prices in US $ Import Prices in US $ Exchange Rate Trends Money Market Rates Agricultural Prices Industrial Materials Prices Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Percent change from previous period seasonally adjusted at an annual rate Annual 4th Qtr Nov Dec Jan Feb United States 2.6 -8.1 _-6.4 10.7 -2.2 3.0 1.5 3.7 -5.6 Japan 1.0 0.4 3.5 11.1 11.6 4.1 -7.7 -2.0 West Germany -2.3 -3.2 0.4 3.1 8.8 -22.1 -5.8 France 2.6 -1.5 1.1 2.6 -9.5 -16.5 -24.1 -17.1 United Kingdom -3.9 2.0 3.3 _ _ 0.9 4.9 6.0 6.0 17.4 -1.6 -3.1 -3.2 3.0 -7.0 0.5 -10.0 5.7 8.7 0.7 United States Japan 3.3 West Germany -1.1 2.0 1.4 3.4 Italy -1.2 Canada -4.4 Percent change from previous period seasonally adjusted at an annual rate Annual 3d Qtr 4th Qtr Jan Feb 6.2 3.2 4.3 3.7 3.5 2.3 4.2 Japan 4.9 2.6 _ 1.8 2.3 1.3 3.3 4.4 -0.6 West Germany 6.0 5.3 3.6 2.4 0.6 2.8 4.8 5.9 rrance 13.3 12.0 9.5 United Kingdom 11.9 8.6 4.6 6.0 10.3 10.8 -------------------- 3.3 6.2 5.2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Percent change from previous period seasonally adjusted at an annual rate Annual 1st Qtr 2d Qtr 3d Qtr 4th Qtr 6.8 10.1 7.1 1.6 4.2 5.9 7.6 2.6 9.6 2.6 5.0 -7.7 9.0 6.2 1.7 3.0 -5.7 -1.3 12.2 2.7 4.6 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Money Supply, M-1 8 United States b 7.1 6.6 11.0 Japan 3.7 7.1 3.0 West Germany 1.1 3.6 10.3 France 12.2 13.9 10.0 United Kingdom NA NA 15.1 Italy 11.2 11.6 15.3 Annual 2d Qtr 3d Qtr 4th Qtr Jan Feb 6.9 6.7 4.6 3.3 9.4 15.0 2.9 6.0 6.6 2.2 -6.1 3.3 3.0 2.3 8.4 -18.8 -4.5 9.9 1.1 14.6 24.5 10.1 24.2 -22.6 -2.4 a Based on amounts in national currency units. b Including M1-A and M1-B. Unemployment Rate a Annual 3d Qtr 4th Qtr Dec Jan Feb United States 7.5 9.6 9.4 7.4 7.3 7.1 7.1 United Kingdom 10.0 11.6 12.3 12.6 12.7 12.8 12.8 Percent change from previous period seasonally adjusted at an annual rate 7.3 7.2 12.9 13.0 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 United States 6.3 -9.2 -41.6 -101.7 -23.7 Japan 4.8 6.9 20.8 35.0 11.6 3.9 2.9 4.8 0.8 West Germany -6.8 3.5 4.1 5.9 6.0 2.0 2.0 2.1 -0.2 France -4.7 -12.1 -4.6 -0.5 0.1 United Kingdom 15.3 9.8 4.3 0 0.8 0.2 0.4 0.2 0.4 0.1 Italy -8.6 -5.7 0.6 , Canada -5.0 2.1 1.4 1.5 0.6 United States b Exports 233.5 212.3 200.7 217.6 53.1 55.5 55.9 19.4 Imports 261.0 244.0 258.2 325.6 79.3 86.6 80.0 28.3 Balance -27.5 -31.6 -57.5 -107.9 -26.2 -31.1 -24.1 -8.9 Japan Exports 149.6 138.3 145.5 168.2 42.5 42.2 43.2 14.3 Imports 129.5 119.7 114.1 124.0 31.7 32.1 29.8 9.5 Balance 20.1 18.6 31.5 44.2 10.0 10.0 13.4 4.8 West Germany Exports 175.4 176.4 169.4 172.0 42.4 43.3 42.3 14.3 Imports c 163.4 155.3 152.9 153.1 39.2 38.3 36.4 12.8 Balance 11.9 21.1 16.6 18.8 3.2 5.0 5.9 1.5 France Exports 106.3 96.4 95.1 97.5 25.0 24.5 23.9 7.1 7.6 Imports 115.6 110.5 101.0 100.3 26.1 24.1 24.4 7.5 8.2 Balance -9.3 -14.0 -5.9 -2.8 -1.2 0.4 -0.5 -0.4 -0.6 United Kingdom Exports 102.5 97.1 91.8 93.8 23.6 22.6 23.5 7.4 7.6 Imports 94.6 93.0 92.7 99.5 25.3 24.7 25.1 7.5 7.9 Balance 7.9 4.1 -0.8 -5.7 -1.7 -2.1 -1.6 -0.1 -0.3 _ Italy Exports 75.4 74.0 72.7 73.6 17.1 19.2 18.1 5.7 Imports 91.2 86.8 80.7 84.4 20.3 20.9 21.9 6.9 Balance -15.9 -12.8 -7.9 -10.7 -3.2 -1.7 -3.7 -1.2 Canada Exports 70.5 68.5 73.7 86.8 21.7 22.5 21.8 7.3 Imports 64.4 54.1 59.3 70.8 17.5 18.4 17.4 6.2 Balance 6.1 14.4 14.4 16.1 4.1 4.1 4.4 1.1 Seasonally adjusted. b Imports are customs values. Imports are c.i.f. Annual 4th Qtr Oct Nov Dec Jan Feb a Seasonally adjusted; converted to US dollars at current market rates of exchange. Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Percent change from previous period at an annual rate Annual 3d Qtr 4th Qtr Nov Dec Jan Feb United States 9.2 1.5 1.0 1.4 -2.2 -3.7 -8.4 -2.5 Japan 5.5 --6.4 -2.4 0.2 -14.9 -4.7 -0.2 -17.0 14.8 West Germany -14.9 -2.8 -3.2 -7.1 -23.0 -12.8 35.8 -33.4 -17.8 France -12.0 -5.5 -5.0 --21.6 43.8 United Kingdom NA -7.3 -5.9 -4.8 -17.2 -16.0 33.8 -39.2 -34.0 -11.2 Italy -7.8 -3.2 -5.8 --17.8 Canada 3.9 -2.0 -1.2 -3.7 -5.2 -6.3 0 6.5 14.0 Percent change from previous period at an annual rate Annual 3d Qtr 4th Qtr Dec Jan Feb United States 5.3 -2.0 -3.7 --1.7 3.6 -2.9 -11.9 J a pa n 3.6 -7.3 -5.1 -2.8 -5.2 -8.4 -6.5 -71.3 West Germany -8.6 -4.7 -5.2 -4.8 --22.5 -11.1 -32.6 -15.7 France -7.8 -7.2 -7.0 22.9 United Kingdom NA -6.1 --5.2 -3.9 -17.0 - 13.2 -38.4 -36.4 -0.6 Italy 1.0 -7.3 -7.6 -20.8 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Percent change from previous period at an annual rate Trade-Weighted United States 10.5 10.6 5.8 9.1 26.2 13.7 33.5 Japan West Germany -2.1 7.0 5.8 1.0 -2.0 -0.3 -6.4 France -5.1 -6.1 -4.7 -2.1 -1.4 0.1 -4.2 United Kingdom 2.5 -2.1 -5.0 -2.5 -3.0 -9.6 -17.7 Italy Canada Dollar Cost of Foreign Currency Japan 2.7 -12.8 4.5 -26.1 -4.4 -24.8 -33.5 -32.5 West Germany -24.6 -7.2 -5.2 -11.5 -33.8 -20.4 - -- -55.5 -26.3 --58.7 France -28.7 -20.8 -15.9 -14.7 -33.2 -19.9 -51.6 -26.1 -54.7 United Kingdom -13.2 -13.4 -13.3 -11.9 -25.2 -23.3 -43.7 -28.9 -28.9 Italy -32.8 -18.8 -12.3 -15.6 -32.5 -22.1 -39.3 -25.0 -66.8 Canada -2.5 -2.9 0.1 -5.1 -6.6 -1.7 -4.7 -1.8 -28.2 1st Qtr 2d Qtr 3d Qtr 4th Qtr Jan United States 16.24 12.49 9.23 9.88 11.19 11.66 9.52 8.41 90-day certificates of deposit, secondary market Japan loans and discounts (2 months) West Germany interbank loans (3 months) France interbank money market (3 months) United Kingdom sterling interbank loans (3 months) Italy 20.13 20.15 18.16 17.63 15.65 15.18 15.22 Milan interbank loans (3 months) Canada 18.46 14.48 9.53 10.02 11.40 12.56 11.19 finance paper (3 months) Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Agricultural Prices (Boneless beef, f.o.b., US Ports) United States (Wholesale steer beef, midwest markets) (o per pound) Coffee ($ per pound) (US #3 yellow, c.i.f. Rotterdam $ per metric ton) (Memphis middling 1 1 / 16 inch, $ per pound) Palm Oil (United Kingdom 5% bulk, c.i.f., $ per metric ton) US (No. 2, milled, 4% c.i.f. Rotterdam) (100% grade B c.i.f. Rotterdam) Soybeans (US #2 yellow, c.i.f. Rotterdam $ per metric ton) Soybean Oil (Dutch, f.o.b. ex-mil. $ per metric ton) Soybean Meal (US, c.i.f. Rotterdam $ per metric ton) Sugar (World raw cane, f.o.b. Caribbean Ports, spot prices 0/lb.) Tea Average Auction (London) (US Q per pound) Wheat (US #2. DNS Rotterdam c.i.f. $ per metric ton) Food Indexe (1975=100) 104.3 100.0 101.4 97.6 100.9 100.0 97.4 1.54 1.28 1.40 1.32 1.44 1.45 1.45 583 571 445 502 730 583 591 598 632 481 514 514 496 496 296 288 244 282 283 244 238 598 507 447 527 727 630 661 257 252 219 238 197 167 152 29.03 16.93 8.42 8.49 5.18 3.59 3.66 101.4 91.0 89.9 105.2 156.6 143.1 131.7 209 210 187 183 182 182 182 232 203 167 184 194 178 176 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 77.7 81.0 81.0 81.0 81.0 80.8 57.4 44.9 65.1 56.8 49.3 48.3 50.0 Chrome Ore (South Africa chemical grade, $ per metric ton) 55.0 53.0 50.9 50.0 50.0 50.0 49.7 50.0 Copper a (bar, 4 per pound) 98.7 79.0 67.1 72.0 62.4 59.6 60.8 63.5 Gold ($ per troy ounce) 612.1 460.0 375.5 424.4 360.0 332.2 302.8 302.1 Lead a (4 per pound) 41.1 32.9 24.7 19.2 20.0 19.2 18.9 17.2 Manganese Ore (48% Mn, $ per long ton) 78.5 82.1 79.9 73.3 69.8 69.8 69.8 69.8 Nickel ($ per pound) Cathode major producer 3.5 3.5 3.2 3.2 3.2 3.2 3.2 3.2 LME Cash 3.0 2.7 2.2 2.1 2.2 2.2 2.2 2.2 Platinum ($ per troy ounce) 475.0 475.0 475.0 475.0 475.0 Metals week, New York dealers' price 677.0 446.0 326.7 422.6 358.2 319.7 275.3 276.4 Rubber (4 per pound) Synthetic b Natural c 73.8 56.8 45.4 56.2 49.6 42.9 42.0 42.0 Silver ($ per troy ounce) 20.7 10.5 7.9 11.4 8.1 7.1 6.0 6.1 Steel Scrap d ($ per long ton) 91.2 92.0 63.1 73.2 86.4 81.1 82.5 82.0 Tin a (a per pound) 761.3 641.4 581.6 590.9 556.6 537.6 504.7 499.0 Tungsten Ore (contained metal, $ per metric ton) 18,219 18,097 13,426 10,177 10,243 10,009 10,952 11,568 US Steel (finished steel, composite, $ per long ton) Zinc a (? per pound) 34.4 38.4 33.7 Lumber Index a (1975-100) 167 159 140 190 176 160 169 180 Industrial Materials Index r (1975 = 100) 184 166 142 152 138 124 124.9 122.7 a Approximates world market price frequently used by major world producers and traders, although only small quantities of these metals are actually traded on the LME. b S-type styrene, US export price. c Quoted on New York market. d Average of No. I heavy melting steel scrap and No. 2 bundles delivered to consumers at Pittsburgh, Philadelphia, and Chicago. e This index is compiled by using the average of 11 types of lumber whose prices are regarded as bellwethers of US lumber construction costs. rThe industrial materials index is compiled by The Economist for 18 raw materials which enter international trade. Commodities are weighted by 3-year moving averages of imports into industrialized countries. Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 World Crude Oil Production Excluding Natural Gas Liquids Annual 3d Qtr 4th Qtr Jan World 53,718 53,195 53,661 Non-Communist countries 45,243 41,602 38,810 38,228 39,257 38,711 38,952 Developed countries 12,859 12,886 13,276 13,864 14,302 14,216 14,618 United States 8,597 8,572 8,658 8,680 8,735 8,776 8,807 8,737 Canada 1,424 1,285 1,270 1,356 1,411 1,397 1,448 United Kingdom Norway 700 Other 921 911 953 27 N on-OPEC LDCs 7,515 7,565 7,704 Mexico 2,746 2,724 2,723 2,644 Egypt 595 598 665 689 827 833 890 Other 2,912 3,117 3,222 3,468 3,942 4,008 4,091 OPEC 17,440 16,930 16,630 14,591 Algeria 1,020 803 701 699 638 650 633 600 Ecuador 204 211 211 236 253 261 253 260 Gabon 152 157 150 150 Indonesia 1,466 1,400 1,411 1,160 Iran 2,187 2,002 2,299 1,400 Iraq 2,514 993 972 922 1,203 1,249 1,233 1,200 Kuwait b 1,389 947 663 881 912 933 834 800 Libya 1,830 1,137 1,183 1,076 1,073 1,027 1,000 1,000 Neutral Zone c 544 370 317 390 410 386 380 380 Nigeria 2,058 1,445 1,298 1,241 1,393 1,232 1,600 1,400 Qatar 471 405 328 295 399 440 317 280 Saudi Arabia b 4,444 4,338 3,699 3,300 Venezuela 1,781 0 1,813 1,843 1,765 1,555 _ Communist countries 14,220 14,225 14,204 14,360 14,461 14,484 14,709 14,042 USSR 11,700 11,790 11,750 11,820 11,870 11,864 12,067 11,400 China 2,113 2,024 2,044 2,120 2,171 2,200 2,222 2,222 Other a Preliminary. b Excluding Neutral Zone production, which is shown separately. Production is shared equally between Saudi Arabia and Kuwait. Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Big Seven: Inland Oil Consumption United States a 17,006 16,058 15,296 15,184 15,708 15,508 15,631 15,602 15,353 16,150 Japan 4,674 4,444 4,204 4,193 4,349 3,992 3,883 4,374 4,997 West Germany 2,356 2,120 2,024 2,009 2,014 2,079 1,877 2,993 1,856 France 1,965 1,744 1,632 1,594 1,531 1,305 1,587 1,530 1,577 1,763 United Kingdom 1,422 1,325 1,345 1,290 1,621 1,571 1,830 1,981 1,850 Italy b 1,602 1,705 1,618 1,594 1,513 1,381 1,502 1,560 1,558 2,035 Canada 1,730 1,617 1,454 1,354 1,346 1,340 1,410 1,423 1,311 a Including bunkers, refinery fuel, and losses. b Principal products only prior to 1981. Big Seven: Crude Oil Imports United States 5,220 4,406 3,488 3,329 Japan 4,373 3,919 3,657 3,567 West Germany 1,953 1,591 1,451 1,307 France 2,182 1,804 1,596 1,429 United Kingdom 893 736 565 456 Italy 1,860 1,816 1,710 1,532 Canada 557 521 334 247 Thousand b/d Annual 3d Qtr Oct Nov Dec Jan 3,402 3,395 3,751 3,552 3,126 3,664 3,531 3,405 3,489 3,722 3,194 1,332 1,269 1,060 1,366 1,328 1,395 1,172 1,346, 1,325 1,502 482 511 506 478 486 1,369 1,416. 244 219 187 235 285 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 OPEC average b 18.67 30.87 34.50 33.63 29.31 Algeria 42? API 0.10% sulfur 19.65 37.59 39.58 35.79 31.30 Ecuador 28? API 0.93% sulfur 22.41 34.42 34.50 32.96 27.59 Gabon 29? API 1.26 % sulfur 18.20 31.09 34.83 34.00 29.82 Indonesia 35? API 0.09% sulfur 18.35 30.55 35.00 34.92 29.95 Light 19.45 34.54 36.60 31.05 28.61 Heavy 310 API 1.60% sulfur 18.49 33.60 35.57 29.15 27.44 Iraq ? 35? API 1.95% sulfur 18.56 30.30 36.66 34.86 30.32 Kuwait 31 ? API 2.50% sulfur 18.48 29.84 35.08 32.30 27.68 Libya 40? API 0.22% sulfur 21.16 36.07 40.08 35.69 30.91 Nigeria 34? API 0.16% sulfur 20.86 35.50 38.48 35.64 30.22 Qatar 40? API 1.17% sulfur 19.72 31.76 37.12 34.56 29.95 Berri 39? API 1.16% sulfur 19.33 30.19 34.04 34.68 29.96 Light 17.26 28.67 32.50 34.00 29.46 Medium 31 ? API 2.40% sulfur 16.79 28.12 31.84 32.40 27.86 Heavy 27? API 2.85% sulfur 16.41 27.67 31.13 31.00 26.46 UAE 39? API 0.75% sulfur 19.81 31.57 36.42 34.74 30.38 Venezuela 26? API 1.52% sulfur 17.22 28.44 32.88 32.88 28.69 a F.o.b. prices set by the government for direct sales and, in most cases, for the producing company buy-back oil. b Weighted by the volume of production. Beginning in 1981 the price of Kirkuk (Mediterranean) is used in calculating the OPEC average official sales price. 28.70 28.59 30.50 30.50 27.50 27.50 29.00 29.00 29.53 29.53 28.00 29.11 27.10 27.55 29.43 29.43 27.30 27.30 30.40 30.40 29.12 27.90 29.49 29.49 29.52 29.27 29.00 29.00 27.40 27.65 26.00 26.50 29.56 29.31 27.88 27.88 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 OPEC: Average Crude Oil Sales Price 30.87 29.31 28.70 J18.667 11.29 11.02 11.77 12.88 12.93 3.39 1973 74 75 76 77 78 79 80 81 82 83 84 J 1985 25X1 304830 3-85 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2 Sanitized Copy Approved for Release 2011/03/28: CIA-RDP85-01097R000400190008-2

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